The Reasons Mitt Romney Pays Lower Taxes Than Most Americans

Mitt Romney is not the only one who is scratching his head on how he pays almost half in taxes of what the Obamas paid, and much lower than the average American.

There has been a lot of talk about how is it possible for a very rich man like Mitt Romney to pay less in taxes than the average American – actually less than a welfare recipient.

Financial experts may be able to anser that question for you.

In 2010, Romney and his wife totaled $21.6 million in income and paid slightly more than $3 million in federal income taxes. That’s good for an effective tax rate of 13.9 percent, according to the documents he released. Last year, according to estimates Romney released, the pair took in $20.9 million, on which they will pay $3.2 million — 15.4 percent of their income, according to the Boston Globe.

By contrast, The Washington Post points out, the Obamas, had $1.7 million in income in 2010 and paid an effective tax rate of 26.3 percent, way more than the Romneys.

So, what gives? So can it be remotely possible for a man worth hundreds of millions wind up with a tax rate similar to that paid by a household earning $50,000 per year?

Salary.com and an economic professor help explain how this could happen:

“The answer lies not in any shady accounting or financial trickery, but in the federal income tax code,” explained Joseph Newpol, a professor of law, taxation and financial planning at Bentley University in Waltham, Mass.

“Essentially, the policy is this: if you have income from capital, we’re going to tax it at a preferential rate,” Newpol said.

The tax code was implemented during the George W. Bush administration, the professor explains, which should come as a surprise to absolutely no one.

“…encourge people to (…) create jobs.” The wealthy don’t seem to be investing in creating jobs in America. They’re create in places like India and China.
It’s cheaper to send raw material to China from Seattle than to Portland from Seattle. The frieght rates are somehow cheaper(?). Why that is I can’t figure out. This is a good reason why the wealthy don’t invest in the USA; it’s not cheap enough!